Social impact bondsSarah Ryan  | CUPE Research

Social Impact Bonds (SIBs), a new form of privatization, are gathering steam in Canada. Despite the name, SIBs are not actually bonds but rather a structure to outsource the financing, planning and evaluation of social programs to third parties while providing profits to private investors. They’re also known as Pay for Success Bonds or Social Benefit Bonds under the larger umbrella of social enterprise and social finance.

In the SIB model, investment firms provide upfront money for social programs. If particular outcomes are met, the government pays back the private investor with a profit. The model involves a whole slew of third party consultants who help negotiate the contract, manage the project and evaluate the outcomes.

This new model comes out of the United Kingdom and has been used in the United States, Australia and Canada. Most of the projects have applied to prison recidivism, early childhood education and care, and homelessness.

SIBs in Canada

SIBs are being promoted in many areas of the country:

  • The 2015 federal budget included a social finance initiative that will help new social finance projects become ‘investment ready.’
  • The government of Saskatchewan has one functioning SIB and is developing four new ones.
  • The Ontario Liberal government is going to pilot at least one SIB project in 2016. They also support the MaRS corporation, which is actively promoting SIBs.
  • The Liberal government in British Columbia has introduced Community Contribution Companies, which are for-profit companies operating in areas that were previously public or not-for-profit.

Problems with SIBs

Private profit: Investors can make as much as a 15 per cent return on their investment from taxpayer-
funded social programs. Adding profit as an additional financial hurdle only puts more pressure on already tightly funded programs. And it’s just not right that private investors make a profit off of services and supports for the most vulnerable in our society.

Calculating success: SIBs have an evaluation process that determines whether and how much investors are paid by the government. Often the evaluation focuses on simplified outcomes that lose sight of quality. The profit motive can also affect who can access social program SIBs because service providers may cherry pick clients with fewer needs to maximize profit.

Impact on workers: SIBs can foster a lack of stability and security because it is unknown whether the project funding will continue. They can also put significant pressure on workers to achieve particular narrow and measurable outcomes with a detrimental impact on overall quality.

Risk: Like public-private partnership advocates, SIB advocates speak of transferring risk from the public sector to the private sector. However, in the majority of cases SIBs are developed for approaches that already have a proven track record. Rather than attracting investment in new projects, SIBs just privatize and weaken successful public and not-for-profit programs.

Alternatives to SIBs

The best alternative to the SIB funding model is also the simplest and most obvious one: traditional public funding. Many social programs have been underfunded for years under successive liberal and conservative governments. Adequate funding with reasonable targets for high quality outcomes can strengthen and improve public services without introducing a profit motive.

What can you do?

Educate: Learn about SIBs. Visit for more info. Talk to other CUPE members and employers about this issue.

Bargain: If you work in a sector that may be affected by SIBs, be sure to strengthen collective agreement language on job security and technological change.

Mobilize: If you find out a SIB is being considered in your workplace, mobilize members and allies against the project. CUPE can help your local develop a plan.